Media companies including ITV, Trinity Mirror and Johnston Press reporting signs of let-up in ad revenue decline
It's not the end. It's not even the beginning of the end. But to paraphrase Winston Churchill, it may be the end of the beginning of the brutal advertising recession that has battered UK media over the past six to nine months.
Media companies including ITV, Trinity Mirror and Johnston Press are starting to see some positive signs of a bottoming out of the vertiginous year-on-year advertising revenue declines the industry has endured since mid-2008.
In the wider economy, voices are also being tentatively raised to say that the worst of the recession may be over.
Mervyn King, the governor of the Bank of England, today painted a mixed picture of the timeline for an economic recovery in the UK. On the one hand, King put back the forecast for a return to economic growth from the end of this year to mid-2010. On the other, he said that it was true that there were reasons for optimism as the pace of economic decline had now moderated.
However, analysts warn that the real litmus test of the road to recovery for the media industry will be how advertisers react in the months leading up to Christmas 2009.
Trinity Mirror today pointed out some glimmers of light in its May performance for its national newspaper operation – if not the ailing regional division.
The Daily Mirror publisher also said that it expects a better performance, at least on a relative basis, in the second half of 2009.
This is to be expected – when you're comparing quarterly advertising revenue with year on year declines of 30% and more for the same period in 2008, the new figures are likely to look rosier.
But it also alleviates at least some of pressure on publicly listed media companies that have had only horror stories to tell the City in their recent results announcements.
Johnston Press also today indicated that there had been "some stability" in ad revenue in recent weeks. John Fry, the company's chief executive, said:
"We have go to the part where it starts to get easier. Ads have stabilised, albeit at a much lower level, but stable week to week.
"It would be dangerous for me to start talking about economic recovery, but we are not seeing it [ad revenue] drop like last year. We are not in the green shoots area yet, we are still bumping along the bottom."
Daily Mail & General Trust in March reported signs of stabilisation in classified revenues outside of the recruitment sector.
"The industry buzz word is stabilisation," said Alex de Groote, a media analyst at Panmure Gordon, today. De Groote added:
"Things are not really getting better at this point but a bottoming out means they are not getting worse. The feeling is that in the fourth quarter last year and the first in 2009 things hit a nadir.
"The second quarter has not been that much better, fractionally maybe, but the hope is that the secong half will see the situation get a little better."
ITV, which is set to put out an interim management statement early tomorrow ahead of its annual general meeting, has also started to see some signs of stabilisation.
Brokers Numis expect ITV1's approximate 20% year-on-year fall in ad revenue in the first half of this year to narrow to a 10% fall in the second half.
However, one senior ITV executive warned that there is likely to be a W-shaped bounce for the struggling broadcaster. The predictions is for ITV to show signs of improvement, on a relative basis, in the final three months of 2009, followed by a challenging first quarter in 2010.
ITV is then is expected to see an advertising boost from the second quarter of 2010, fuelled by the football World Cup in South Africa and spending across the board in the run-up to a general election.
"Current trading is bumping along the bottom. There will be good months and bad months but things seem to be stabilising," said Paul Richards, an analyst at Numis. He added:
"The question is when are they going to get better. The fourth quarter is the key quarter. If we can see mid-single digit declines [at ITV] then we can safely say that things are stabilising, that the worst may be over and that we can then look forward to recovery."
The changing mood of the City about the prospects for media companies has also been reflected in an improved share price performance for some in the sector in recent weeks.
"The stock market priced some of these [media] names at almost zero worth, mega-distressed, when in fact in the last six weeks to two months there has been a clear, strong and concerted rally in these businesses in equity prices," says De Groote.
De Groote points out that, relative to the performance of the FTSE 100, Trinity Mirror's share price has risen 46% over the past three months; while Johnston Press - a worse than expected set of figures today notwithstanding - is up 286%, and DMGT up 20% over the same period.
However, de Groote less optimistic on when the UK ad market will return to real growth. "In terms of ad growth at some stage next year we may see positive growth in traditional media," he said. "Perhaps close to the end of the year."